Golconda - The Source Of Wealth

Constantly excavating GEMS from the INDIAN STOCK MARKET ;)
The objective of this blog is to empower common people with better understanding of the intricacies involved in the functioning of the stock market in the prevailing economic ecosystem

Monday, June 29, 2009

“Like an ox-cart driver in monsoon season or the skipper of a grounded ship, one must sometimes go forward by going back.” John Barth

If one plough up this terrain as an investment avenue ,outcome would be a rich harvest . The vapid comments about the weatherthathave been the scorching the headlines for thelast couple of weeksarebound to have a profound impression on the economy . The year 2009 so far has seencountries like China , Argentina , Africa, South Americaand the parts of US , which make up for the close totwo third of the worlds agricultural output witnessdrought or drought like conditions. India withmore than half of its of its population engaged in the agricultural sector is contributing appox 17-19% to the GDP . India is the seventh largest country in the world and haveappox 43 % of its area under agriculture . Italso accounts for 14 % of India’s exports .The delayed monsoon could definitely cast a shadow on the path of economic recovery apart fromhamperingthe governments target of 4 % agricultural output .It would also be the cause of concern on the food security front .We had a great last food grain production season ,that would cater to any short term demand . It is a stark reality that our agriculturesector is predominantly rain fed thus it has no option but to bear the vagaries of the weather .The Kharif crops season runs from June till October end ,it is heavily dependent onthe south west monsoon .The major Kharif crops are cereals, paddy ,Pulses , Soybean , maize ,millets, oilseedsetc.Food Grains have a weightage of 5 % in the a Whole sale price Index (WPI ) which is a measure of inflation in India. Though , WPI has moved in negative territory but the inflation in food grains prices in the index is a matter of concern .

The international prices of most of the commoditieshave been fallingin 2009 , in comparisonto their prices during the same period in 2008 .The benchmark Food and Agriculture Organization( FAO ) Food Price Index though has been moving upwards for last three months;butitis stilllowerby 30 % from its peak in June 2008 .The FAO Food price index averaged 152 points in May 2009 . The increase in demand of agro commodities is proportionate to growth in population and per capita income (expected to grow by appox 14 % this fiscal ) . It has been observedthat thefood grain production rate is lower than annual rate of growth of population in India ; thus there would always be a tight demand and supply situation .The growth in foodgrain production has been fallingsignificantly since 1990 . A glance at few commodities would give us the idea of the road ahead ; the poor rain inAssam and West Bengal has already affected the Tea production ,coffee production in the regions of Karnataka hasalso taken a beating due to thesimilar reasons. . Tea and coffee prices remain firm in the India market . India is the worlds largest producer of tea .India’s Sugar demand is already being catered by permitting imports ofsugar as there has been a shortfall of appox 7 million tonnes .Pulses are always in short supply due to huge consumption as it being the affordable source of protein .Rice - india have enough stock to control any kind of surge in prices . non basmati rice is also banned for exports ;though we would be shipping 2 million tonnes as aid to African countries .Cereal outputsis expected to see a slight decline in 2009 .Wheat ,Coarse grains , Oil seeds price are already on their way up. Agricultural food commodities price have seen a surge primarily due to lower global agricultural output ,diversionof agri commodities like Soybean, cornetc for generation of bio fuels ,below average buffer stocks worldwide .As per the reports ;the India Food and Agri business market size in a decade would bein the region overUSD 500 billion. There are opportunitiesexisting in trading , production , warehousing , retailing ,logistics ,packaging ,processing etcwhich would fetch interest of many companies as well as entrepreneurs .This sector also influencethe fortunes of companies engaged in fertilizers , farm equipments , pesticides and other allied industries .

DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Monday, June 15, 2009

Transshipment in logistics parlance means when goods during their voyage from port of loading to the port of discharge are unloaded from one vessel to be reloaded on a different vessel for the final movement .If there is delay in connecting the onward vessel the consignment gets delayed .Logistics sector seems to have encountered a similar hurdle due to slackening domestics as well as global demand for goods and services .The consistent growth in manufacturing , retail as well as EXIM trade had put the logistics sector in a sweet spot. Logistics has assumed a tremendous importance in the economic system today and is intertwined with the GDP growth .A slowdown in growth across all industries has made this sector encounter an arduous situation .The logistics companies have been on a major expansion spree by investing in warehouse spaces, technology etc suddenly these asset heavy organizations are forced to anchor their capital expenditure plans. As the key driving verticals telecom, automobile and IT hardware are witnessing a slump , thus the companies that would be able to leverage existing infrastructure rather than creating new ones coupled with innovative solutions would be a able to ride the tide . The slow down in GDP ,increasing oil prices ,decline in container traffic , unprecedented drop in sea freight rates , entry of new players backed with VC/PE funding have further put pressure on the margins .The focus would now be on the low asset intensive companies offering value added solutions by leveraging technology thereby creating a niche for themselves.The sector has seen PE/VC investments in following unlisted companies Om Logistics , Quick Jet Cargo , Elbee , Direct Logistics , BLR India .The listed Logistics companies like Gati ,TCI , Gateway distriparks have all underperformed in the market for the quarter ended March 31,. The instances like the international buyer Arcandor‘s application for bankruptcy in Germany would result in non payment to exporter which in turn could delay the payments of the service providers will have an impact on the sector sentiments. Even the IATA figures have not been optimistic on the air cargo traffic.

I would term this as a short term aberration and would still like to sail with this sector. According to published reports ,India logistics markets is expected to be a USD 125 billion by year 2010 .The compound annual growth rate ( CAGR ) for the next few year is expected to be 7-8% .Indian logistics cost is expected to be around 13 percent of the GDP .The key drivers are going to be enormous infrastructure spending in terms of developments of roads , rail , airports, ports network .The expected implementation of GST by April 2010 will also give a flip to the logistics Sector . The stimulus packages to revive economies would also help this sector take off.DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Friday, June 12, 2009

The mysterious shoulder injury shrouding Sehwag has prevented him from playing at the Mecca of the cricket world and at the same time ruling him out of the ICC Twenty20 world cup. Friends ,We are just two weeks away from end of the first quarter of the current fiscal and would have reached the half way mark for the year 2009 .As a rational investor , it is pertinent to offset idiosyncratic risk by conducting a midyear or a quarterly portfolio check up .The following comments of legendary trader Jesse Livermore would definitely ring a bell . "...the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions.”

A quick portfolio review would definitely have a significant impact on the returns for rest of the year . Indian growth story coupled with positive global cues have so far kept the momentum of the stock market intact ,albeit ,volatility at times pushed us to the limit .The indices so far has provided us with great respite after getting whacked in the year 2008 .I feel the economic environment of 2008 has converted everyone into prudent investing .There has been a paradigm shift in the investment behaviour ,no more overzealous garbage picking happening in the market .

"The average man doesn't wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He doesn't even wish to have to think." ~ Jesse Livermore"

Snapshot of few suggested Parameters that can be adopted for a Portfolio Check up

Political Situation – National

Neighbouring Countries

Global Political Scenario

Fiscal Deficit of the Nation

Impact of Inflation , Currency ,GDP etc

Economic Scenario

Emerging / Sunrise Industries

International trade statistics / Balance of Payment

Impact on Existing Holding

Review Existing Holdings

Re- assessment of individuals Risk levels

Revision of expectations on return from the holdings

Portfolio returns versus market performance

Performance of peers

Tax liabilities

Future Investment strategy

Predicting Market Trends

Play an active part in investment eco system

I will close this post by saying whenever you possess any investment guidance “ DON’T STOCK JUST SHARE ”. I am looking forward to receiving investment strategies ,ideas that would further enhance sphere of investment goals for rest of the year

DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Tuesday, June 9, 2009

While taking a stroll few months back , I noticed abanner “ loot hi loot " dangling outside a textile cloth merchant shop , clearly reflecting the plight of the stocks from the textile industry .I ventured inside and picked up few trouser lengths . The hunt for the Tailor landed me at the shop from which during my schooldays; I used to get the trousers stitched . To my utter surprise , I sawtraditional indian women wear hanging outside his shop .We both could place each other ,he blurted out that in the times of ready to wear they are only left to do is alteration work , thus he diversified into the women wear .I quite apprehensively gave him my symbol of support for the industry . He delivereda masterpiece .Similarly ,when the size of theIndian Textile and ready to wear industry is shrinking due to theglobal economic meltdown ; the industry is looking forward toa stimulus package in this budget constitutingof favouring policies like better infrastructure, cheaper loan and interest rates , strengthening of technology up gradation fund , reduction of customs ,excise duties , protection from forex losses etc, ; that can not only assist the vibrantManchester of india regain its slowly loosing sheen but could also revive the industry . The textile and ready to wearindustry plays a vital role in the Indian economy .

Indian textile and ready to wear industry contributes 4 percent to the GDP. It offers livelihood to an estimated 35-40 million people ,in addition there are millions employed in the allied industries, thus making it second largest employer after agriculture . The activities encompass from production of raw materials like jute , cotton , silk to finished garments made of natural as well as man made fibres .Its share ininternational textile trade is close to 4-5percent . it is the largest producer and second-largest exporter of jute goods, the second-largest producer of silk ,the seventh-largest producer of wool .India is the third-largest cotton producer both in terms of bales produced and in metric tons, Indian Textile Industry contributes about 10 percent to industrial production, 14 per cent to the manufacturing sector, and makes sizeable contribution to the country's total export earnings. It has a total domestic market size of US $25-30billion apart from export market worth to be close to USD 15-20 billon. It is expected that market should touch USD 100-110 billion with the return of buoyancy in the economy.

Few of the textile stocks that gotweaved into anupward spiral in last few months in anticipation of government unveiling sops to revive the languishing sector

Name of the Company

52 week High /Low

CMP

Arvind Mills

44/11

31

Bombay Dyeing

782/110

372

Gokaldas Exports

226/43

121

Zodiac

455/148

311

SEL manufacturing

757/38

82

Raymonds Limited

238/68

163

Alok Industry

52/11

25

Welspun India

49/13

40

There are options galore in textile industry stocks , thus the above information focuses on why to buy than what to buy ,One can look at creating abespoke textile portfolio keeping in view that the gradual improvement in domestic as well as international economy will reflect on this sectorquite instantly.

DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Monday, June 1, 2009

The great leg spinner Shane Warne has the ability to astound the batsman with the variation inhis bowling .When he is bowling you never know what’s going to happen ! He has the ability to bowl six different deliveries . He canentice the batsman with the heaps offlight making him come out of the safety zone and get stumped. It required the great experience and relevant skill set of master strokes man Sachin Tendulkar to playrollicking innings against him.Similarly ,don’t get ostentatiousby the currentflightof the Sensex , don’t leave the safety zone , be prudentand may be use this as an opportunity to get healthy not anorexic by shedding some extra flab .To be precise ; in the words of Warren Buffet –“ Why potential buyers even look at projections prepared by sellers baffles me. Charlie and I never give them a glance, but instead keep in mind the storyof the man with an ailing horse. Visiting the vet, he said: "Can you help me? Sometimes my horse walks justfine and sometimes he limps." The vet's reply was pointed: "No problem - when he's walking fine, sellhim." The seller of a business practically always knows far more about it than the buyer and also picks the time of sale - a time when the business is likely to be walking "just fine."

Have a devoted look at your holdings , May be ,its time to reshuffle your portfolio! A quick assessment could reap greatbenefits !The volatile market environment could make you chance upon some real gems in theemerging sectors at an attractive valuations .Ignore investment seers espousing market trends ,just pick up fair value stocks with great business lineage during such market fluctuations .One can also take cue from the investment being made by the financial institutions in other emerging markets like Russia .The pendulum swing is going to differentiate investor from a speculator .Keep your interest alive in the Test Match …………

Delivery of the Day India Glycols Limited

DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Thursday, May 28, 2009

India, with an estimated student population of 400 million, is one of the largest education and training markets in the world. Indian Middle class spending on education forms a large chunk of their expense. Government focus on improving the education system in India is only going to intensify. As the Government considers education, a key in sustaining economic development, education in India is witnessing increased government support with the budget having an increased allocation for education by 20 % to Rs 34, 400 crore (€5.4 bn) during FY 2009. Government is planning to spend 6 % of the GDP in next few years on education.

Private education market in India is assessed to be USD 40bn -50bn . The K-12 segment alone, which includes students from kindergarten to the age of 17, is estimated to bemore than US$20 billion. The market for private colleges is appreciated at US$7 billion while tutoring is valued atUS$5 billion. Other territories such as test preparation, pre-schooling and vocational training significance is US$1-2 billion each. Textbooks and stationery, educational CD-ROMs, multimedia content, child skill enhancement, e-learning, teacher training and finishing schools for the IT and the BPO sectors are some of the other noteworthy sectors .

Presently, the key players in this segment are NIIT Ltd, Everonn Systems India, Aptech Education, Educomp Solutions, Core Projects and there are other private playerswho are now venturing into this burgeoning market to tap the immense opportunities. The kindergarten to 12th grade (K -12 ) along with vocational training segment offers an exciting opportunity for the private business houses.

These companies are seeing huge growth in terms of volume as well as value. For instance, Educomp has seen its revenue is up by 130.7%, EBIDTA by 97.4% and PAT is up 61.4% on consolidated basis despite the current global slowdown in Q3 of 2008-09. Although. NIIT Ltd has reported 60 % drop in its net profit for the third quarter of 2008-09, to Rs 5.5 crore but that has been mainly due to higher depreciation and forex losses incurred by an associate firm and is had seen increased profits in the previous quarter which shows a great potential.

India predominately is a service driven economy with services contributing over 60% of the GDP; hence there would always be a need to develop a reservoir of skilled human resource to meet demand and supply gap. Declining BPL (Below Poverty Line) rate and increasing per capita income of Indian households is a very optimistic harbinger to the increasing demand in the education sector. As increasing number of families enter the economic echelon wherein they can afford to send their children to private schools, tutorials centres, vocation training centres etc, demand for these institutions in a brick and click model would only increase with time. As the scalability of the business model involves replication of an existing model at a fresh location; thus the growth trajectory would be very fast and successful.

Education is one sector which has recently seen surge in interest by the private equity players and venture capital funds. As they assess a considerable demand and supply gap in this space that offers a promising opportunity for the existing companies to scale up their operation and the private companies to venture into this arena. It is also considered as a recession proof industry. There are investment already made by SAIF, Helix in the domestic education services companies like Mahesh Tutorials, Career launchers etc

Government initiatives like Sarv Siksha Abhiyan , Focus on girl education , free and compulsory education for all 6-14 year old ,comfortable access to schools for children would result in substantial increase in number of class rooms along with the new schools ,this would also open up opportunities for the Public Private Partnership for the private enterprises through build-own-operate-transfer (BOOT) modelunder the Sarva Shiksha Abhiyaan and ICT Schools programmes. This demonstrates both the scale of the challenge and also the massive opportunities that will arise for education suppliers over the coming years . Recently, the central government invited private participation in over 1,000 of its industrial training institutes and offered academic and financial autonomy to private players. Companies such as Tata, Larsen & Toubro, Educomp and Wipro have shown keen interest in participating in this initiative

The endeavour in the post is to highlight investment theme without employing arithmetic ,in case, any one requires detailed analysis of individual stocks would be glad to forward the same .At this moment , I am reminded of a Chinese proverb - If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people

DISCLAIMERThis blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Friday, May 22, 2009

To achieve tangible results in the realms of the stock market ,it is vital to discern between the factual and the esoteric information .The Baltic Dry Index is a great tool to gauge the market environment, at the same time assisting in offsetting the perennial market volatility .

The Baltic Dry Index ( BDI ) is a real time indicator of the global demand for commodities and raw materials as it is also a measure of what it cost to ship raw materials around the world .The demand and supply of raw material provides insight into the future trends of production and consumptions of goods .Compared to other parameters like inflation indices etc, it is difficult to influence the BDI , as a growing economy reflects instantly with the increase in price of raw materials , commodities , as well as commodity based currencies .The index is not tradeable ; it indicates the price in real time on daily basis , thus bringing in more reliability to take an informed investment decision.

The BDI started plummeting in the middle of year 2008 ,subsequently global equity market tailed it .The first quarter of 2009 has seen the index moving higher ,clearly putting emphasis on the basic principle of supply and demands bolstering the global economy .Though the index has gone up by more than 140% till now in the year 2009 .However, at the same time ,it is still off close to 80 % from the high it achieved in middle of 2008 .There are contrary views also existing to this philosophy, but my fetish to track this while making investment has yielded optimistic results.